Two participants in the Ohio State Teachers' Retirement System, Columbus, filed a class-action lawsuit against the $77 billion pension fund's board, alleging that changes made to cost-of-living adjustments in 2017 violated state laws, the U.S. Constitution and the state constitution.
The suit, filed May 23 in U.S. District Court in Cincinnati, alleges the pension fund's elimination of the COLA for all retirees in 2017 contained violations of procedural and substantive due process, an impairment of contract, and a violation of the contracts clause and takings clause in both the U.S. and Ohio constitutions.
The pension fund's board in March 2017 reduced the COLA to zero from 2% effective July 1, 2017. The board cited the reduction of the assumed rate of return for the defined benefit plan to 7.45% from 7.75% following an experience study conducted by the pension fund's actuarial consultant, The Segal Group, as the reason for the elimination of the COLA.
In a posting on its website at the time, the pension fund said the change was necessary because "Segal's projections showed STRS Ohio's funded ratio at 62.6% with a funding period of 57.7 years."
STRS was required by state law to present a plan to reduce the funding period to 30 years or less, and the reduction in COLA had been made to improve the funding ratio to 70.8% with a funding period of 20 years, if economic and demographic assumptions were met. At the time, the board intended to revisit the decision in 2022.
STRS spokesman Nick Treneff declined comment.
Jeffrey S. Goldenberg, partner at Goldenberg Schneider, one of the attorneys for the plaintiffs, said: "We believe the State Teachers Retirement Board broke faith with Ohio's retired teachers in 2017, when it abruptly and indefinitely eliminated their cost-of-living increases ... without having the legal authority to do so."
The state's retired teachers were unnecessarily burdened by the actions taken by the board to address the fund's "perceived financial issues," Mr. Goldenberg said. "We do not believe this was necessary, just or legal."